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Turnpike Authority Bonds Escape Junk Status — Barely

The NC Turnpike Authority is in the process of issuing bonds (debt) to build the state's first government-sponsored toll road in western Wake County.

Well, a bond rating agency apparently doesn't think too highly of the project. Fitch's has given the bonds a rating of "BBB-" one step above junk bond status. This is after the state has agreed to commit $25 million per year in funding for the project, supposedly to make up for the "gap" in lacking revenues to cover expenses.

Staying out of the junk bond status is vitally important for the turnpike authority because many financial institutions can't and won't invest in junk bonds.

A quick look at some bond rates show that BBB- bonds pay about 2 percent higher interest rate than AA or AAA bonds. So this rating is going to cost even more money through higher interest costs over the life of the toll project.

But the take away here is we have a toll road project that private investment firms think more than likely isn't financially viable. If these bonds weren't backed by a government agency, there's probably no way they'd get financed. But since government is pledging its backing, it gets built.

We need more projects like the Mid-Currituck Toll Bridge that are funding through public-private partnerships where a private company bears the risks and rewards of building toll roads, not the taxpayers. That way, only projects that are viable will get built, and we avoid building expensive new roads on which few people will travel (Fayetteville loop, anyone?)

So don't be surprised a couple of years from now when the Turnpike Authority comes back to the General Assembly saying that ridership projections aren't keeping up with needed revenues and they want more tax dollars to plug the gap.

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